From: Steve Buchwalter [sbuchwalter@socal.rr.com]
Sent: Friday, October 03, 2003 8:18 PM
To: rule-comments@sec.gov
Subject: 3110 (NASD-98-74)
The purpose of this comment is to oppose the NASD's proposed amendment
to Rule 3110[f]. The amendment would include subsection [f][4][B],
allowing enforcement of a choice of law provision in arbitration. I have
represented investors in pursuit of claims for almost 10 years and
therefore have considerable appreciation as to the impact of this proposal.
The amendment allows brokerage firms located in New York or which are
defending claims arbitrated with the New York Stock Exchange or which
involve securities traded in New York to potentially impose New York
law on citizens of the other 49 states simply by including an apparently
innocuous choice of law clause in a new account agreement.
This is a critical issue to investors with claims in arbitration. Unlike
most states, the state of New York has not adopted the Uniform Securities
Act; and therefore, if the amendment is adopted, investors from other
jurisdictions may be deprived of the protections afforded by their state
laws. These include statutory claims for misrepresentation and omission
against all sellers and control persons. While these claims may be available
under federal law, the state laws generally have a longer statute of
limitations and do not allow many of the defenses which have been raised
federally. The state laws also provide for attorney fees which are not
available under New York law or in federal statutes.
Not only does New York not have a securities law which can be enforced by
investors, there is case law in New York which may limit investor remedies
under the common law.
The point is that investors are entitled to the protections available under
their state laws. National brokerage firms make the economic decision to
operate in a given state. They should not then be allowed to sneak a choice
of law clause into a customer agreement that deprives customers of their
rights in their own jurisdiction.
The purported objective of the NASD is to protect investors. This proposal
does the opposite. It protects the industry. The fact that the proposal
makes the amendment retroactive confirms its anti-investor bias.
I respectfully request that the rule be rejected.
Steve Buchwalter
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